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Funding power projects remains a key challenge

Project financing will continue to remain the single largest challenge for independent water and power project (IWPP) companies operating in the GCC, according to experts.

The GCC utilities leaders are all set to discuss challenges of funding for regional power projects at second Global IWPP Summit in Ras Al Khaimah next week. More than 200 participants from public and private sectors will attend the three-day summit, starting from Sunday.

The experts, at a Press conference on Sunday, pointed out that even as utilities providers explore the most competitive options to secure funding for their projects, the role of private capital was still not completely understood or often viewed with scepticism.

“The GCC’s utilities sector is trying to keep pace with the region’s demand for power and water, but with the high number of projects being announced by governments in the region, private equity can help the developers to complete their projects on time and at less risk to governments,” said Nick Carter, director-general, Regulation and Supervision Bureau, the independent regulatory body for the water, wastewater and electricity.

Most IWPPs fund their project costs through a combination of debt and equity and its ratio recently has been adjusted to 75:25 from 80:20, but still considered on higher side. The debt may be raised in international, regional, Islamic or local debt or capital markets. “The availability of project capital also depends on local market conditions and the specifics of the project,” said Daniel Zywietz, managing director, Ambata Capital Middle East and CEO of Enerwhere.

“Financing a government-backed IWPP in Oman or Saudi Arabia is relatively easy, as local banks in these countries have a lot of liquidity and investors trust their track record of successful IWPPs,” he added.

Ruurd Abma, managing director, Utico Middle East, said that as IWPPs rush to satisfy the growing demand for power and water in the region, they are always faced with the challenge of obtaining capital for new projects.

“Much of the time is spent in finding the right financing partner and negotiating the appropriate contract and terms with the financiers.